There appears to be real problems with the way directors’ remuneration is reported.
As part of the ongoing audit and corporate governance reform programme the FRC recently extended its monitoring work to include a review of directors’ remuneration reporting for a selection of 10 companies. As a result the FRC had to write to nine of these companies on matters mostly relating to the clarity of these targets and performance against them!
In its recently published Annual Review of Corporate Reporting, the FRC reported the findings from its monitoring activities, together with its expectations for the coming reporting season. It reviewed 263 company reports and wrote to 112 companies with questions about their accounts. Following FRC enquiries, 25 companies were required to restate aspects of their accounts.
The most frequently raised issues identified by the FRC related to impairments, and judgements and estimates. This reflects the ongoing economic uncertainties companies need to factor into their financial reporting and the need for detailed explanations to help users understand the positions taken. The FRC also continued to identify a significant number of issues with cash flow statements, resulting in seven companies restating their results.
The FRC’s Executive Director of Supervision, Sarah Rapson said: “During periods of economic uncertainty, it is especially vital that companies provide users of annual reports and accounts with decision-useful information.
“While the overall quality of company reporting we have seen remains consistent, companies should continue to familiarise themselves with FRC findings and expectations to ensure they are providing high quality disclosures.”
